ESMA Launches Key Consultations on Crypto-Asset Regulations under MiCA

ESMA is consulting on exceptions to the callback and classification of crypto-assets as financial instruments, with the aim of harmonizing EU regulations with MiFID II.

The European Securities and Markets Authority (ESMA) has recently published two significant advisory documents under the Markets in Crypto-assets (MiCA) Regulation, focusing on reverse attraction and the classification of crypto-assets as financial instruments.

One of the consultation documents concerns the guidelines on draw-back, where ESMA seeks information on the conditions for applying the draw-back exemption and supervisory practices to prevent its abuse. This exception, as stated by ESMA, is intended to be narrowly framed, limiting the provision of cryptoasset services by third-country firms to cases where customer is the exclusive originator of the service. The move is an attempt to prevent circumvention of the MiCA regulation by third country firms.

The other consultation paper delves into the classification of cryptoassets as financial instruments. ESMA aims to establish clear conditions and criteria for this classification, linking the MiCA regulation to the Markets in Financial Instruments Directive II (MiFID II). The proposed guidelines aim to provide national competent authorities (NCAs) and market participants with structured yet flexible criteria to determine whether a cryptoasset falls into the category of a financial instrument.

This initiative underlines ESMA’s commitment to develop a consistent EU-wide regulatory approach to cryptoassets and ensure that they are in line with global standards in cryptoasset regulation. The consultation period for these documents is due to end on 29 April 2024, with ESMA planning to consider feedback in the second quarter of 2024 and expecting to publish a final report in the fourth quarter of that year.

These consultations are a crucial step in clarifying the regulatory framework for crypto-assets within the EU, ensuring a harmonized approach and providing much-needed clarity to stakeholders in the fast-growing crypto market.​​​​

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